Document of The World Bank FOR OFFICIAL USE ONLY Report No. 4859 PROJECT COMPLETION REPORT MALAWI: NKULA FALLS II HYDROELECTRIC PROJECT (CREDIT 691-MAI AND LOANS 1387-T-MAI AND 1388-MAI) December 29, 1983 Energy Division Eastern Africa Regional Office This document his a restxleted distribution and may be used by recipients only in the perfonmance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. PROJECT COMPLETION REPORT FOR OFFICIAL USE ONLY MALAWI: NLULA FALLS II HYDROELECTRIC PROJECT (CREDIT 691-MIW AND LOANS 1387-T-MAI AND 1388-MW!) Table of Contents Page No. Preface i Basic Data Sheet ii Highlights v I. INTRODUCTION II. PROJECT PREPARATION AND APPRAISAL 2 Origin, Preparation, Appraisal and Negotiation 2 Project Description 2 Project Objectives 3 III. PROJECT IMPLEMENTATION, OPERATION AND COSTS Credit/Loan Effectiveness and Project Start-up 3 Project Execution 3 Ecological Aspects 4 Reporting 5 Project Costs and Related Financing 5 Disbursements 6 Performance of Consultants and Contractors 6 IV . OPERATING PERFORMANCE 7 V. FINANCIAL AND RELATED ASPECTS 8 Financial Arrangements 8 Accounting and Audit 9 Financial Performance and Compliance with Covenants 9 VI. INSTITUTIONAL PERFORMANCE 10 Management and Organization Effectiveness 10 Training 11 VII. ECONOMIC JUSTIFICATION 12 Market Growth 12 Return on Investment 12 VIII. BANK PERFORMANCE 13 Overall Performance and Working Relationships 13 IX. CONCLUSION 13 Overall Achievements 13 L.essons Learned 13 This document has a restricted distribution and may be ulsed by recipients only in tlhe performance of their of ficial duties. Its contents rnay not otherwise be disclosed without World Bank authcrization. Table of Contents (contd.) Page No. Anrnexes .. Main Covenants of Legal Documents 15 2. Construction Program 16 3, Statement of Conitracts and Works 17 4. Project Cost Estimates 18 5. Schedule of fLsbursements 19 6. Incone Statement 20 7. Balance Sheet 21 8. Funds Flov Statement 22 Appendices A. Comments from the Office of the President and Cabinet 23 B. Cormnents from ESCOM 25 PROJECT COMPLETION REPORT KALAWt: NKULA FALLS I I HYDROELECTRIC PROJECT (CREDIT 691-MAI AND LOANS 1387-T-MAI AND 1388-MAI) Preface The project constituted part of power generation program of the Electricity Supply Commission (ESCOMX in the period 1976-1980 and included the construction of the Nkula dam and hydropower plant on the Shire River containing three 20-iW generating units, consulting services, and training. The Bank Group assisted in this with Credit 691-MAI and Loans 1387-T-MAI and 1388-MAI (US$25 million in total) which were agreed on April 28, 1977. The agreements became effective on November 11, 1977, and the last disbursement was made on September 30, 1980. The Project Completion Report (PCR) was prepared by the East African Regional Office based on the appraisal report and other documents in the Bank files, a completion report prepared by ESCOM, and the findings of a project completion mission which visited Malawi ini March 1982. The PCR summarizes the main points of particular interest. It shows the vulnerability of a landlocked developing country, which, even when the administratLon of the relevant utility is smooth and the project free of procurement problems, must rely on imported equipment and materials for maior construction works. The PCR also notes the success of ESCOM's training program and manpower development. The project has not been subjected to an audit by the Operations Evaluation Department. Following normal procedures, a draft copy of this report was sent for comments to the Government, ESCOM and the co-financiers for the project. Those conments which were received have been taken into account in finaliz- ing this report, and are attached to the report as Appendices A and B. - ii - PROJECT PERFORMANCE AUDIT BASIC DATA MALAWI: NXULA FALLS II HYDROELECTRIC PROJECT (CREDIT 691-MAI AND LOANS 1387-T-MAI AND 1388-MAI) KEY PROJECT DATA Appraisal Actual or Item Expectation Current Estimate Total Project Cost (US$ million) 66.4 82.5 Overrun (%) - 24.0 Credit and Loan Amounts (US$ million)a/ 25.0 25.0 Disbursed 25.0 25.0 Cancelled - - Date for Completion of Physical Components 12/80 12/80 b/ Proportion of Time Overrun (%) 0 0 Financial Rate of Return on the Project 9% 10% Financial Performance Unsatisfactory Institutional Performance Satisfactory Cumulative Estimated and Actual Disbursements 12/31 As of June 30: 1978 1979 1980 1981 1981 (i) Appraisal Estimate 8.0 c/ 11.2 14.6 16.2 17.0 d/ (ii) Actual 8.0 c/ 4.6 16.2 17.0 17.0 (ii) as % of (i) 100 41 110 105 100 a/ Co-financiers for the project: Commonwealth Development Corporation, African Development Bank, Kreditanstalt fur Wiederaufbaum and European Development Fund (para. 1.03). b/ The third unit was commissioned in April 1981, but was not part of the original design (para. 2.02. The completion of the barrage gates was delayed about a year due to transportation difficulties (para. 3.03). c/ CR 691-MAI. d/ Third Window (US$8 million) and Standard IBRD (US$9 million) Loans. - iii - OTHER PROJECT DATA Actual or Item Original Revisions Est. Actual First Mention in Files or Timetable - - 1/30/75 Government's Application - - 1/21/75 Negotiations - - 2/22/77 Board Approval - - 3/29/77 Credit and Loan Agreement Date - - 4/28/77 Effectiveness Late 8/77 - 11/11/77 Closing Date 12/31/81 - 12/31/81 Borrower Government of Malawi (Credit) and Electricity Supply Commission (ESCOM) (Loans) Executing Agency ESCOM Fiscal Year of ESCOM January 1 - December 31 Follow-up Project Name None - iv - Mission Data Month/ No. of No. of Date Year Weeks Persons Manweeks of Report Appraisal 11/75 3 3 9.0 3/11/77 Supervlsion I 9/76 2 2 4.0 II 5/77 1 2 2.0 6/13/77 III 12/77 1 2 2.0 2/10/78 IV 8/78 1 1 1.0 9/14/78 V 7/79 1.5 2 3.0 10/23/79 VI 3/80 1 1 1.0 5/06/80 ViI 12/80 1.5 2 3.0 2/26/81 VIII 3/82 1.5 2 3.0 6/21/82 Total 13.5 28.0 Currency Exchange Data Appraisal US$1 - MK 0.91 Tntervening Years Average 1978 US$1 - MK 0.84 1979 US$1 = MK 0.81 1980 US$1 = MK 0.81 1981 US$1 = MK 0.89 1982 US$1 = MK 0.93 1983 US$1 = MK 1.05 - v - PROJECT COMPLETION REPORT MALAWI: NKULA FALLS II "YDROELECTRIC PROJECT (CREDIT 691-MAI AND LOANS 1387-T-MAI AND 1388-MAI) Highlights The project comprised the construction of a hydroelectric generation station with two 20-MW units, consulting services and training components. A major objective was to meet Malawi's growing industrial, commercial and domestic electricity demand. The power station constituted the first step in the least cost capital development program of the Electrieity Supply Commission (ESCOM) from 1980 to 2005. It also had as its objective the strengthening of the power sector through the development of local manpower through appropriate training facilities and programs and through establishing the financial viability of ESCOM. The objectives were fully achieved except for the financial objective. Time overruns were minimal and the achievement exceptional under the circumstances (paras. 1.02 and 3.02-3.04). Cost increases (para. 3.09) were justifiable given the circumstances. Institutional performance under the project was satisfactory except in the financial area. ESCOM has reduced its unskilled manpower to an acceptable level and is gradually replacing expatriates with nationals (para. 6.08). To achieve greater efficiency, it has decentralized its operational management. Actual sales and revenues were lower than the estimates. Although tariff increases were implemented yearly, they were made too late in most years to enable ESCOM to comply with the rate of return covenant (para. 5.06). Among the lessons learned are the importance of not underestimating the transportation difficulties of a landlocked country (para. 3.05), the importance of instituting good training programs (paras. 6.04-6.07), and difficulties in load growth forecasting (para. 7.02). - 1 - P'ROJECT C0KMPII,TToN RE1PORT MALAW1: NKLILA FALf,S Tl. IIYDROELEICTRI.C PROJECT (CREDIT 091-MA] AND LOANS L:387-T-MAI AND 1388-MAI) I. INTRODUCTION 1.01 The Nkuiia Falls 'IT project was one of a series of planned projects to develop the hydropoteritial of the ShJire River to further the Government of Malawi's policy of meeting the country's growing industrial, comnmercial and donesttc MtoctrLcily damnaud at the cheapest cost. The project comprised: construction of a rork-fill dam about 7 m in height and about 700 m in lengtlh at the Nkula site; construction of a low pressure cut and cover conduit, a headrace ttunnel, penstock and a tailrace outlet system of about 1,280 m and a powerhouse with three 20-MW hydro units consulting services and training. 1.02 The project was completed about a year behind the original schedule mainly because of difficulties caused by a war in the region during the period of construction and in transporting equipment and materials. Although the hydroelectric units were commissioned on time, these delays put the construction and installation of the barrage gates about a year behind. The project was completed with a cost overrun of US$16 million, about 24% higher then the appraisal estimate. This increase was due to contractor's claims under price escalation provisions, transportation difficulties, and construction of a third generating unit not included in the appraisal estimate and other changes in design (para. 2.02). 1.03 The Bank Group assistance of US$25 million was made in three lending operations, effective on the same date, November 11, 1977: US$8 million (IDA Credit 691-MAI); US$8 million (Third Window Loan 1387-T-MAI) and US$9 million (IBRD Loan 1388-MAI). It was agreed with the borrower that Credit funds should be used first. Other assistance was provided by the Commonwealth Development Corporation (CDC), European Development Fund (EDF), Germany (KfW), African Development Bank (AfDB) and Barclays Bank/Standard Chartered Bank. 1.04 During the appraisal annual average growth rates of electricity sales were estimated at 12% as against the actual of 6%; the decrease is mainly caused by the country's economic slow-down and worldwide recession. The lower load growth does not affect the economic justification of the project which remained the least cost solution. 1.05 ESCOM's operations through the project period were generally satisfactory although the covenanted rates of return were achieved only in FY80 due to lower load growth and Government delays with tariff increases. FY82 estimates indicate that 8% rate of return required for that year will not be achieved. ESCOM also incurred long term debts in FY81 which appear to have contravened the covenanted debt coverage ratio (para. 5.07). uQSl 4O? 41101 - 2 - II. PROJECT PREPARATION AND APPRAISAL Origin, PreparationL Appraisal and Negotiations 2.01 The project had its origin in the overall development program of the water resources of the Shire River basin, which was the subject of many studies and investigations in the late l.960s. The Bank Group assisted the Government in the development of the Shire River through its lending operations for the Tedzani hydropower station (Credits 178-MAL in 1970 and 426-MAL in 1978). 2.02 In August 1974 the UK Ministry of Overseas Development assisted the Government of Malawi and ESCOM in commissioning two consultant companies for studies of all the major hydroelectric development possibilities in Malawi and to advise the Government of Malawi on the physical and economic feasibility of the second stage development of the Nkula Falls Hydroelectric Scheme. Their report, presented in May 1975, confirmed the earlier conclusion that, following completion of the Tedzani Falls Stage II Project, the next hydroelectric development should take place at Nkula Falls. The recommendation was that the first two units (2 x 18 MW) should be in operation by January 1, 1980, and the estimated total cost would be MK 35 million, based on December 31, 1974 prices. The project was appraised in November 1975 and negotiations were held in Washington in February 1977. No problems arose during negotiations and agreements were concluded between the Bank Group and the Borrower. The only significant change in the project from the original scope as presented to the Board of Directors was the increase of the number of generating units to three and purchase of 20-MW generating units as a result of very favorable bid prices. Annex 1 sets forth the major covenants of the credit and loan agreements. Project Description 2.03 The project originally consisted of the following: (i) construction of a rock-fill dam about 7 meters high and 700 meters long on the Shire River, at the Nkula site, to form a reservoir and enable daily regulation of the river flow; (ii) construction of a low-pressure cut-and-cover conduit, headrace tunnel, penstock, and tailrace outlet system of about 1,280 meters, and a powerhouse with two units with a generating capacity of about 18 MW each, but designed so as to enable the installation of three additional units of the same generating capacity each; (iii) consulting services; and (iv) a training program for the Borrower's professional and technical staff. -3- Project Objectives 2.04 The principal objectives of the project were: providing additional generating capacity for the national power system (60 MW) and 175 GWh yearly average), thus saving on foreign expenditures by substituting less expensive hydropower for imported oil; initiating institutional improvements through a well-conceived training program; as well as gradually reducing the number of expatriates and employing inore local staff. In general, the above objectives have been achieved. III. PROJECT IMPLEMENTATION, OPERATION AND COSTS Credit/Loan Effectiveness and Project Start-up 3.01 The conditions of credit and loan effectiveness were confined to the fulfillment of all conditions of effectiveness of other co-financiers and various legal actions (authorization and ratification of credit/loan documents and the subsidiary loan agreement). The credit/loans were made effective on November 11, 1977, about two and a half months late. Project Execution 3.02 After advertising in the international press and approval by IBRD and other lenders, tender documents were issued progressively from September 1976 to suit the project program. The contract for the main civil engineering works was awarded on 31 March 1977 and the site works commenced in June 1977. Details of this and other contracts are shown in Annexes 2 and 3. Having started later than intended, the contractor did his best to adhere to the implementation schedule. Although certain milestone dates affecting other contractors were missed, by rescheduling barrage gate installation with the modification of the method of construction of civil works, the contractor was able to complete the main part of waterways in April 1980 about two months later than the original date. Delivery delays (para. 3.05) resulted in the need for revislons to the program and the steel penstocks and tunnel liners were completed to that revised schedule. 3.03 Barrage gates were delayed until March 1982, about 19 months, mainly as a result of late manufacture and delivery of parts (para. 3.05). Substantial completion of the civil engineering works was attained in approximately 44 months from the date of issue of tender enquiries; this is to be compared with the 42 months allowed in the construction program in the staff appraisal report. 3.04 Electrical and mechanical plant scheduled for completion in June 1980 was delayed three months owing to transport disruptions but the schedule as agreed In September 1979 was maintained until completion. The generating sets were put into commercial service at the following dates: unit 1, October 1980; (appraisal schedule September 1980); unit 2, November 1980 (appraisal schedule December 1980) and unit 3, April 1981 (unscheduled by appraisal mission). -.4- 3.05 A number of probiems not anticipated during project appraisal were encountered during the construction of this relatively small project located in a landlocked country, such as: (a) transportation difficulties in equipment and material due to a war in the region; (b) continuous congestion at the port of Beira in Mozambique due to inefficient operation; (c) shortage of motor fuel due to transportation difficulties; (d) shortage of reinforcing steel (some of which had to be flown into the country) due to transportation difficulties; (e) shortage of cement due to machinery breakdovn at the cement factory in Malawi which caused delays in the construction of civil works; during the breakdown period cement had to be imported from neighboring countries, but it created additional problems because of transportation difficulties; (f) faccory strikes in supplier's country affected delivery dates of various equipment; (g) workshops of a supplier were flooded and powerlines were washed away and consequently spillway gates and associated equipment had to be transported to Malawi at a time when hostilities in the region had intensified and further delays occurred during transportation; (h) the contractor had difficulties in casting gears for radial spillway gates, as it was the first time for him to cast gears of this size; and (i) bad rock conditions were encountered during the excavation of the headrace tunnel (1,200 m) which caused some additional delays. Ecological Aspects 3.06 A general ecological review of the Tedzani site, B km downstream of Nkula Falls II, was completed in late 1974 during the course of the construction of Tedzani Barrage. This study and experiences on Tedzani Stage I and Nkula Falls I, at the project site, indicated that the project would not have any negative effects of such magnitude as to impair the feasibility of the dams nor to cause major ecological problems. However, the breeding areas for fish downstream have been subjected to constant water levels and this has affected the breeding habits of fish. Normially, the level of the river goes up and down thus exposing some of the areas to sunshine. It is not known quantitatively how much this has reduced fish production downstream (Appendix A). There were no permanent human habitations and no crops likely to be inundated by the proposed dam. ESCOM had arranged a reconnaissance study satisfactory to the Bank to examine the possible ecological changes arising from the project and to recommend the steps which should be. taken to avoid or mitigate urdesirabte side effects. The study was carried out by the University of Malawi. The Government and ESCOM reviewed the conclusions and recommendations of the study wl'h the - 5 - Bank, implemented those which related to the project and noted those relevant to future hydro projects. Reporting 3.07 ESCOM was informed of the Bank Group's reporting requirements immediately after credit/loan signing and reporting has been satisfactory. The progress reports on the project were regular and contained the necessary information. The Bank Group has had full insight into all major project problems such as transportation difficulties. Project Costs and Related Financing 3.08 The final project costs of K73 (US$82.5) million were 24% higher than the original estimates of K60.4 million (UF,$66.4) million. A detailed comparison of these costs is given in Annex 4. The appraisal estimates were revised in 1977 to allow for the effect of high inflation rates and modified scope of work. 3.09 The major portion of the excess cost was for local expenditures of civil works (59%) due to very high inflation on labor and material costs. Despite the change in the project scope (para. 2.02), the extra cost of the equipment due to addition of a third unit was only 1% because of extremely low bids. Cost overruns were ftnanced by ESCOM. 3.10 The original financing plan at appraisal is given below. Each financing agency financed the foreign exchange cost of separately, identifiable components (as shown in Annex 4) except for CDC whose financing was flexible and could be applied to local or foreign exchange costs. -----Funds Allocated- Financing Agency MK million US$ million IBRD/IDA 22.8 25.0 AfDB 3.6 4.1 EDF 8.6 9.5 Germany (KfW) 3.8 4.0 CDC 12.5 13.7 Government/ESCOM 6.8 7.4 Other 3.5 3.9 132-kV line 12.8 14.1 Total Sources 74.4 81.7 3.11 Foreign funds provided by the above arrangement were in excess of the appraisal cost estimate by US$5 million. Immediatelv after bidding the Government and ESCOM determined that they would be able to add a third unit to the project because they had received lower manufacturers' offers than estimated. 3.12 The final financing plan is given below. It shows that the foreign currency financing requirement for the construction of the project was about US$56.7 million compared to all available funds of about US$55.9 million. (Deficit of US$0.8 million was covered by the Government.) -6- Funds Total Available Required Funds Funds for for Foreign Surplus Available IDC Construction Costs (Deficit) -----(US$ million)…-------- IDA (691-MAI) 8.0 8.0 8.0 IBRD (1387-T-MAI) 8.0 8.0 8.0 IBRD (1388-MAI) 9.0 9.0 9.0 AfDB 5.0 5.0 6.8 (1.8) KfW 6.0 (1.1) 4.9 7.6 (2.7) EDF 8.0 8.0 11.5 (3.5) CDC (Main) 9.0 9.0 5.8 a/ 3.2 CDC (Supplementary) 4.0 4.0 Total 57.0 (1.1) 55.9 56.7 (0.8) a/ CDC made two loans to cover the project cost increases. 3.13 The main civil contractor made about fifty claims (total value about SK 10.5 million - equivalent to about US$14.0 million). Although most have been settled, a claim related to the gates is still under dispute. This claim was related to the transportation difficulties encountered during the course of the construction (due mainly to political and economic difficulties in Zimbabwe and Mozambique), and also some design changes such as inclusion of the third unit, larger control building and switchyard. ESCOM does not expect that the final settlement of this claim will have any significant financial implications on the project costs. Disbursements 3.14 The original estimate of disbursements and the actual disbursements are given in Annex 5. Cumulative disbursements for the Credit planned to be disbursed first, were lower than the appraisal estimates due to Project start-up delays (para. 3.02). However, disbursements for Loans were very much higher than originally estimated and loans proceeds were fully disbursed one year earlier than anticipated. This was achieved through special contractural arrangements with contractors, such as increased advances and replacement of the retention money with bank guarantees. Performance of Consultants and Contractors 3.15 The performance of both the civil consultants and the mechanical and electrical consultants was satisfactory. The construction supervision was adeouate and the modification of the method of construction to offset and provide for the delay of the gates by allowing the civil contractor to proceed without them by building an additional small cofferdam was entirely successful. Without this timely action the project would have suffered greater cost increases and further delay. However, the consultants have not been equally successful in estimating final project costs and the extent of additionally needed works. Furthermore, they did not propose necessary protective measures to avoid or minimize the harmful effects.: F turbine cavitation and reservoir siltation which were observed in L initial operation of the project (para. 4.01). 3.16 ESCOM and their consultants provided an effective team, both in providing the off-site administration and design and in controlling the progress and quality assurance during manufacture and on stce. The work was carried out on time and construction records and measurements were kept up to date. Designs and drawings were provided on time with little or no delay in accommodating agreed changes. 3.17 The civil contractor was well-organized and efficient in construction work and the quality of work was good. However, he made numerous and excessive claims. Many of these claims were rejected. The suppliers performed satisfactorily although they were affected by domestic problems outside their control. IV. OPERATING PERFORMANCE 4.01 Since the project has not been in service long enough and some of its components were installed late (para. 3.03), it is diEficult to compare the actual operating periormance of the project's physical facilities with the expectations at appraisal. In general, the initial operating performance is satisfactory. Some operational problems have been experienced, mostly related to protection relay setting and occasional generating units tripping. More serious problems have been observed with reservoir siltation. The tributaries of the Shire River carry extremely heavy silt loads into the main river. Much of this is carried by the Shire River during the flood period but s ie is deposited downstream of the confluences and then gradually eroded and carried in suspension later by the steady flow of the river. The effect of silt suspended in the water passing through the generating units has been rather severe. The silt load in the Shire River has steadily increased in recent years as a result of soil erosion due to increased pressure on the land, and unless controlled the situation could continue to deteriorate. It is clear that effective conservation measures to reduce the incidence of soil erosion must be taken not only to impro%ra conditions for the hydropower plants but more importantly to protect and preserve valuable farm land. The project needs some modification of filter screens and raking equipment to cope with the increased siltation, trash and debris which are present in quantities greater than expected. These problems have to be studied and appropriate remedial measures should be adopted. Furthermore, some cavitation problems have been encountered since generating units were operated at the beginning with thp lower than the designed head due to late delivery of the barrage gates. It appears that engineering consultants failed to promptly propose necessary protective measures. Availability of the power station in 1982 was 93%, which is below the expected value. 4.02 ESCOM's staff is well trained and operates project facilities satisfactorily. Reliable and proven equipment has been used for the project facilities; spare parts are available and preventive maintenance is appropriate. - 8 - V. FINANCIAL AND RELATED ASPECTS Financial Arrangements 5.01 A comparison of actual and appraisal estimate of the sources and application of funds for the period 1977-1982 is shown beLow: Total 1977-1982- ------------- Appraisal Actual & Appraisal Actual & Estimate Revised Estimate Revised ( MK '000) (%) Sources Internal Cash Generation 81,159 59,785 76.3 55.4 Less: Debt Service 51,327 45,266 48.2 41.9 Net Internal Cash Generation 29,832 14,519 28.1 13.5 Borrowing (including IDC) IDA (691-MAI) 9,566 8,847 9.0 8.2 IBRD (1388-MAI) 8,180 7,330 7.7 6.8 IBRD (1387-T-MAI) 8,440 7,413 7.9 6.9 ADB (J06) 4,601 5,817 4.3 5.4 KfW 4,501 6,368 4.2 5.9 EDF 10,474 9,2,40 9.9 8.5 CDC 12,500 13,234 11.8 12.3 CDC - Additional - 2,666 - 2.5 Government - 2,792 - 2.6 Other 15,783 25 153 14.8 23.3 Total Borrowing 74,045 88,860 69.6 82.4 Capital Contribution _2,450 4,479 2.3 4.1 Total Sources of Funds 106,327 107,858 100.0 100.0 Application of Funds Construction Requirements Nkula Falls II 1/ 59,958 71,496 56.4 66.3 Transmission 13,380 14,406 12.6 13.4 Rural Development - 2,336 - 2.1 Other 16,117 17,280 15.1 16.0 Total Construction 89,455 105,518 84.1 97.8 Increase in Working Capital 16,872 2,340 15.9 2.2 Total Application of Funds 106,327 107,858 100.0 LOO.0 I/ Actual expenditure on the project in 1976 Was MK 1.5 million compared to MK 0.4 million estimated for that year. 5.02 Construction expenditure was above the estimated amount for reasons outlined in paras. 3.09, 3.11 and 3.13. Net internal cash generation provided only 13.5% of total financing requirements for the 1977-1982 period compared with 28.1% estimated at appraisal. Internal cash generation was significantly lower than forecast (paras. 5.05-5.06) but lower debt service, reflecting misLly lower interest rates than forecast at appraisal on some of ESCOM's other borrowings served to partly offset this. Borrowings and capital contributions were higher than the appraisal estimate. Working capital decreased substantially over the period; accounts receivable position was at acceptable level representing less than two months of sales; however, inventories were high reflecting larger delivery periods resulting from transportation problems and delays; the cash position was tight and ESCOM had to obtain overdrafts to meet its cash requirements. Accounting, and Audit 5.03 ESCOM's accounting records are well maintained and financial reports are prepared promptly. ESCOK's audit is conducted by the international firm: Deloitte, Haskins and Sells, and the arrangement is satisfactory. During the project period, ESCOM always met the covenant requiring its financial statements to be audited by independent auditors acceptable to the Bank and submitted to the Bank within four uDnths after the close of the fiscal year. Financial Performance and Compliance with Covenants 5.04 Appraisal estimates and actual Income Statements, Balance Sheets and Funds Flow Statements covering the years L977 to 1982 ate given in Annexes 6, 7 and 8. 5.05 The following table shows the percentage variations in actual financial operating performance compared to the appraisaL estimates. 1977 1978 1979 1980 1981 1982 Electricity sales -7 -9 -5 -12 -28 -27 Average tariff levels 2 -5 -10 -IL 7 L5 Revenues -5 -13 -15 -13 -23 -14 Operating expenses (excl. depreciation) 1 13 L4 24 26 53 Operating income (before depreciation) -8 -22 -23 -23 -35 -30 Internal cash generation -5 -21 -23 -24 -36 -30 5.06 Revenues were below the appraisal estimate due to lower than forecast electricity sales and lower average tariffs (except for 1981 and 1982). The lower growth in electricity sales is mainly due to a decrease, in some of the years, in the annual growth of the commercial and domestic sectors. However, demand growth in the industrial sector was close to the appraisal estimate and its elasticity to tariff increases appears to have - 10 - been minimal. 1/ Operating expenses were higher largely because of increase in staff during the implementation of this project and due to increases in fuel costs amounting to between 50 and 300% since 1979. ESCOM increased its tariffs yearly since the appraisal of this project (Annex 6). However, in spite of the Bank's urging, the tariff adjustments were implemented with considerable delays and consequently were insufficient to enable ESCOM to achieve the required 12% return on revalued net fixed assets in operation for 1978 and 1979 and 8% thereafter, except in 1980 when the 8% return was achieved. This, combined with the high inventory resulted in cash shortages and the need for ESCOM to obtain additiona;. loans to help finance its development program and meet its cash requiremen s (para. 5.02). Although the debt/equity ratio was more conservative in the earlier years than estimated at appraisal, the additional borrowings caused the debt equity ratio to inc:ease from 58/42 it 1979 to 75/25 for 1982 (Annex 7). 5.07 By obtaining the additional loans in 1981 without the Bank's agreement, ESCOM contravened the requirement of Section 5.04 of Loan 1388-MAI which stipilates that ESCOM shall not incur any long term debt unless its net revenues in any year are not less than 1.5 times the debt service requirement for that year (Annex 8). This contravention was also due to delay in implementing tariff increases. Because of completion of this project restoration of ESCOM's financial viability through timely adjustment of electricity tariffs is now proposed to be pursued in the context of other Bank Group operations in Malawi such as structural adjustment lending. However, the compliance with the covenants on revaluation of assets and limitation of capital expeditures has been satisfactory. VI. INSTITUTIONAL PERFORMANCE Management and Organization Effectiveness 6.01 ESCOM is a well managed utility and has a good record in carrying out its responsibilities. Improvements continue to be nade in ESCOM's organizational structure and management practices. A number of measures have been taken to define management responsibilities and to introduce effective decision-making methods. ESCOM reports to the newly established Department of Statutory Bodies in the Office of the President and Cabinet. However, several entities are concerned with the development of the energy and power sector and their activities need to be better coordinated. Further strengthening of the existing energy-related institutions is needed, including more experienced professional staff and adequate financial resources. The vacant post of ESCOM's chief engineer remains to be filled by an experienced professional. 6.02 The 198l reorganization of ESCOM was intended to decentralize operations for the purposes of reducing manpower wastage, delegating more authority to area managers, reducing travel costs, and increasing operating efficiency. The decentralization principle seems well suited to ESCOM's operations although it is still early to determine its effectiveness in practice. 1/ ESCOM has recently prepared a tariff study which is under review in the Bank. - 11 - 6.03 ESCOK is currently engaged in a local staff development program which has as its ultimate goal the replacement of all expatriate staff (14 at the end of 1982) with qualified local staff. Replacements of this nature are effected without undue haste and only when qualified local staff are available. At present the fourteen expatriate staff hold managerial or key positions, but local staff are being actively trained to take over these roles in the future. At the techician level all staff are now Malawians. Training 6.04 Training set in motion under the project and achieved has been very successful, the result of a good response from ESCOK and a thoroughly experienced power training consultant. The development of local staff is founded upon five training programs: (a) the ESCOM training center; (b) on-the-job training; (c) training abroad; (d) training with local organizations and colleges; and (e) participation in seminars and short courses. 6.05 The ESCOM training center was established in 1980. The center trains ESCOM's staff at the artisan and technician level for overhead line work and switchgear fitting including cable jointing. 6.06 In the last two years, a total of 105 engineers and technicians have received on-the-job training with ESCOM4 or with various ESCOM contractors ard manufacturers employed on ESCOM projects. This training has involved about 20 ESCOM staff and has in part been related to the establishment of a local ESCOM technical school and management training for higher level local staff. At present, there are 16 ESCOM staff members in training abroad, mostly in engineering (12) and finance/administration (4). From the original sum of US$300,000 only US$10,000 was approved by the Bank Group involving payment for preparation of the training report by Electricity Supply Board (Ireland). All of overseas training was financed from ESCOM's resources. The remaining sum was eventually reallocated to finance the engineeling works (Appendix B). 6.07 Local training programs consist of training in the Malawi Polytechnical Institute and the Malawi College of Accountancy. They are well suited for artisans, bookkeepers and secretaries. During the past two years ESCOM has sent its higher level staff for training on suitable seainars and courses, for exaaple, on tariff and pricing, loan administration and new and renewable sources of energy. The training programs have had very beneficial impact on ESCOM's effectiveness and institutionaL performance. 6.08 ESCOM employs 2,063 persons which comprise 171 senior staff, 948 junior staff, 484 skilled workers and 460 temporary workers. In 1981 ESCOM reduced its staff strength by about two percent. Staff salaries are sufficiently competitive considering other employrent opportunities for qualified staff in Malawi. ESCOM has had no problems in recruiting and retaining its staff. - 12 - VII. ECONOMIC JUSTIFICATION Market Growth 7.01 The project was to supply additional energy to ESCOM's interconnectej system which supplies, inter alia, Blantyre, Malawi's main industrial a±nd commercial center with a population of 210,000; L'longwe, the new capital, with a population of 87,000; Zomba, with a population of 19,700 1/ and a large sugar estate. The interconnected system accounted for about 98% of ESCOM's sales. 7.02 At the time of appraisal, about two-thirds of ESCOM's industrial sales were to four large industrial consumers. Growth in industrial sales between 1967 and 1975 had varied between 307 in 1975 to 4% in 1974 with an average annual growth rate of 16%. At appraisal ESCOM's forecast for the period 1976-1981 indicated an increase in total electricity saLes from 256 GWh in 1976 to 516 GWh in 1982, with an annual growth of 12.4%. However, actual sales in 1982 were 358 GWH (annual increase of about 5.7%). In 1981 sales were 3% less than in 1980. Obviously, it was difficult to forecast the effects of the economic slow-down in Malawi and impact of price increases in the pattern and volume of electricity usage. Electricity losses remained about 13%. These losses reflect an undeveloped power transmission and distribution system. For 1982-1986 total electricity sales are expected to increase at an average annual growth rate of 6%. Some improvements are an-ticipated in domestic and commercial consumption. 7.03 In 1976 ESCDM's 71 MW of generating facilities included diesel, steam and hydro plant with the hydro component representing about 70% of the total. The hydroelectric power stations were all basically "run-of-river" development on the Middle Shire. An assurance of a sufficient flow rate to operate hydro plants at maximum capacity, even during the driest years, is provided by the Kamuzu Barrage at Liwonde with the enormous reservoir capacity of Lake Malawi. Diesel sets and steam units were being used to meet peak demand and to cover the excess energy requirements over existing hydro capacity and for standby purposes. The projected maximum demand and energy requirements demonstrated that, with the commissioning of the second stage Tedzani Project, the interconnected system would be capable of meeting peak demand and energy requirements until 1980 after which the generating capacity to be provided by the project would be required. Return on Investment 7.04 At appraisal the financial rate of return (FRR) on the project was estimated at 9%, measuring benefits by using the average revenue per kilowatt hour yielded at the 1977 tariff levels. However, had the benefits reflected the average revenues assumed in the financial projections during the project implementation period and then discounted back to the 1977 price level, the rate of return on the project would have been higher, since the tariffs in the financial projections were expected to increase in real terms. The financial rate of return on the project has now been l/ In 1977 the population figures for the three cities were 219,000, 98,000 and 24,000 respectively (Appendix A, para. 5). - 13 - estimated at about 10X using actual tariffs adjusted to 1982 price level. The higher FRR than esttmated at appraisal, in spite of the higher cost of the project, was more than offset by increases in the tariffs. Although the overall financial performance of ESCOM was less than satisfactory during the implementation of this project, the higher FRR was earned in spite of the lower growth in sales than estimated at; appraisal, because the energy output from the project has been at the maximum level since the Nkula plant is used as base toad. VIIl. BANK PERFORMANCE Overall Performance and Working Relationships 8.01 The Bank assisted ESCOM and the Government in preparing the project in a manner that is financially and economically viable and would attract financing from other institutions. Therefore, the credit/loans were essential in securing the financing of the project. The project has fulfilled its purpose from both technical and the institution-building points of view. The financial earnings objectives have not been fully achieved as expected. While ESCO generally promptLy made proposals to the Government for approval of tariff revisions, such approval was inaviariably delayed. The Bank Group's assistance in procurenent-related matters was helpful. 8.02 The Bank Group and ESCOM' cooperated well regarding the Bank's supervisory relationship. The project supervision was regular and changes in supervision staff were minimal. the Bank's prompt support of the engineering consultant's change of construction method (para. 3.02) was helpful. ESCOM's thriving training programs and training center were successful and were aided by Bank funding and systematic guidance and supervision. The Bank Group made a significant contribution to the project. In future, further investments in power generation facilicies are likely to be required. The Bank Group support for such investments would have to be accompanied by further improvenits in the institutional arrangements for the energy sector. IX. CONCLUSIONS OveralL Achievements 9.01 The main objectives of the project by and large have been achieved. The project plays a major role in efficient and reliable power supply in Malawi. Institution-building efforts, particularly staff training, were very successful. The Bank Grotp lending was instrumental in introducing various changes in ESCOM's planning operations and manageriaL procedure but still much remains to be done in further power system improvements. Lessons Learned 9.02 The main lessons to be drawn from this lending operation are: (i) transportation difficulties can be crucial for a landlocked country and due allowances should be made in construction schedules and cost estimates; (ii) the project demonstrated the importaace of employing good and - 14 - experienced consultants, regardless of the project size, who are able to suitably modify the original design and improve methods of construction to suit unforeseen circumstances when necessary and thus avert construction delays; (iii) bad rock conditions can cause delays even in the excavation of a very short tunnel; (iv) load forecast is greatly influenced by the country's economic development, price increases, energy conservation and demand management; and (v) the funding of a good training program and facilities can show a substantial return within a short period. This reinforces the more recent emphasis on development of local manpower as the crucial contribution of Bank lending in Sub-Saharan Africa. - 15 - ANNEX 1 HALAWI Main Covenants of Legal Doctments Section of GA/CA/LA Covenants LA 4.04 ESCOM shall consult with the Complied with. Bank Group regarding any proposed appointments to the senior management positions. LA 5.02 ESCOM shall furnish its Complied with. annual audited accounts to the Bank four months after end of year. LA 5.03a ESCOM shall maintain its Complied with in 1980. Not tariffs at a level which complied with in 1978, will yield rate of return of 1979, 1981. at least 12% in 1978 and 1979 and 8% thereafter. LA 5.07 ESCOM shall not undertake Complied with. annual capital investments of more than US$1.5 million without the Bank agreement. LA 5.05 ESCOM shall annually revalue Complied with. its fixed assets in accordance with methods acceptable to the Bank. LA 5.04 ESCOM shall not incur any Complied with in all years debt unless its net revenues except 1981. shall be at least 1.5 times the maximum debt service. GA 3.04 & ESCOM shall review the Complied with. LA 3.03 conclusions and recommendations of the study of the ecological effects of the project with the Bank and take necessary remedial actions. - 16 - ANNEX 2 HALAWI NUKULA FAI.LS II HYDROELECTRIC P.OJZCT CONSTRUCTION PROGRAM Appraisal Target Date Actual Date - Contract award 04/07/77 03/31/77 - Construction of coffer dam 06/30/77 [04/03/80) - Construction of the main dam and embankment closure 08/31180 [03/31/823 - Construction of power station and tailrace outlets 06/01/80 (09130/80] - Commission of units #1 09/01/80 and 10/80 #2 12/01/80 1i/8o #3 - 04/81 - 17 - BEST COPY AVAILAZE; ANNEX 3 MALAWI NUKULA FALLS LI HYDROELECTRIC PROJECT STATEMENT OF CONTRACTS AND WORKS (including extension for third unit) DESCRtI PTION COMMENCMMENT COMPLETION DATE DATE CIVIL WORKS Main Civil Engineering Works April 1977 August 1980 renstock Lininqs and Trash Rakes April 1977 June 1980 Gates and Sernens April 1977 February 1982 Substations at Lilongwe and Salima April 1979 November 1979 PLANT CO)NTRACTS Turbtneg and Alternators September 1977 June 1981 SCADA System November 1979 Auaust 1982 Power Line Caerier August 1978 July 1980 Transformers arid Switchgear April 1978 June 19A1 Control tuiliding Services July 1979 April 1980 Power Station services October 1979 June 1981 Air Conditioning and Ventilation November 1979 November 1980 Source: ESCOM, August 1982 - 18 - ANNX 4 MAIAWt MJA FALLS II t=DUCMIC POWEBt PlOJECr PROJCr COST ESTsThE I/ (in MK m-llion) APPRAISAL EST114TE - ACrA IN 1977 PRDJECr 5ONE"1ZS 1=CAL FORIEIQ TOA lOL FOIGN Ti-OrAL BAK GtOUP FIRNPED POT1ON BWA(Z, DM), , POWEtH(JSE AND RADS (D 21/23) 6.58 15.37 21.95 15.95 26.31 42.26 TRAXNI .10 *20 .30 .04 .21 .25 SUB1TA 6.68 15.57 22.25 15.99 26.52 42.51 OON TIES 2.85 6.65 9.0O - - - TOAIL BANK GbOU PORTION 9.53 22.22 31.75 15.99 26.52 42.51 AFDB FINANCED PRTIC1N GAS AND SCREN (CD 220) .29 1.86 2.15 .61 1.72 2.33 PSNS13C (CD 24) .18 1.01 1.19 .09 1.71 1.80 E2X3SeRIN (~)WLP .99 2.65 3.64 1.14 2.59 3.73 SuUSLrO' 1.46 5.52 6.98 1.84 6.02 7.86 COTINENCIES .18 .84 1.02 - - TIML APDB PORTION 1.64 6.36 8.00 1.84 6.02 7.86 ElF FINANCED PORTION MUB-DES, ALTERNAM1US (CD 1,2) 1.60 9.50 11.10 .67 10.16 10.83 CONTINGcECIES .69 2.65 3.34 - - - TOTAL EDF PoRTTON 2.29 12.15 14.44 .67 10.16 10.83 IN VFINANCED PORTION CONT?DL, COMMUNICATION5 (CD 3) .08 .47 .55 .08 1.76 1.84 TRAN5POR4ER, SWITGEAR (CD 4/5) .34 2.50 2.84 .39 4.97 5.36 SUBIOAL ; T2 297 3.39 .47 6.73 7.20 xOrDEtTx2IES .21 .96 1.17 - - - TAL KFW P(RT1ON .63 3.93 4.56 .47 6.73 7.20 CDC/EsaXM FINAND PCRTION PWER AND VEMLUtTION (CD 6/7) .05 .20 .25 .42 - .42 ENGEERING (K & D) .09 1.12 1.21 .69 .76 1.45 ADMINISTRS&TION .10 - .10 2.72 - 2.72 SUIBTlAL .24 1.32 1.56 3.8- .76 4.59 CONFINENCETS .02 .06 .08 - - - TOTAL CDC/ESCM PORTION .26 1.38 1.64 3.83 .76 4.59 TOML PR=JEC OST 2/ 14.35 46.04 60.39 22.80 50.19 72.99 IN US$ ILLION 15.8 50.6 66.4 25.7 56.7 82.4 1/ IWLUDIt, THEl HYIM 0 UNIT 2/ ElzC3DINr THE CAPITALI;D Izr!REsT cF KK 9.6 MIL1ION - 19 - ANNEX 5 14LAWI Schedule of Disbursements (a) Credit 691-MAI IDA Fiscal Cumulative Disbursements a/ Actual Disbursements Year and in US$ million equivalent as percrentage of Quarter Appraisal Actual appraisal estimate 1977/78 Dec. 31, 1977 5.610 1.240 22 Mar. 31, 1978 7.000 2.244 32 June 30, 1978 8.000 3.247 41 1978/79 Sept. 30, 1978 8.000 5.003 63 Dec. 31, 1978 8.000 6.654 83 Mar. 31, 1979 8.000 8.000 100 Closing Date - December 31, 1980 a; Fully disbursed In February 1979. (b) Loan 1387-T-MAI and Loan 1388-MAI 1/ 1978/79 Sept. 30, 1978 3.400 (1.600) Dec. 31, 1978 6.600 (J.i30) Mar. 31, 1979 9.060 (4.260) 0.255 (0.138) 3 June 30, 1979 11.260 (5.330) 4.684 (2.202) 40 1979/80 Sept. 30, 1979 12.360 (5.820) 10.364 (4.847) 84 Dec. 31, 1979 13.400 (6.350) 11.683 (4.847) 87 Mar. 31, 1980 14.100 (6.630) 12.503 (5.903) 89 June 30, 1980 14.600 (6.860) 16.232 (7.596) 111 1980/81 Sept. 30, 1980 15.020 (7.060) 17.000 (8.000) 100 Dec. 31, 1980 15.420 (7.250) 100 Mar. 31, 1981 15.820 (7.440) 100 June 30, 1981 16.220 (7.630) 100 1981/82 Sept. 30, 1981 16.620 (7.820) 100 Dec. 31, 1981 17.000 (8.000) 100 Closing Date - December 31, 1983 1/ Total Bank loan is US$17 million of which US$8 million is Third Wtndow. Bank loans were to be disbursed pro-rata on the basis of 9:8 ratio. Third Window loan disbursements are shown In parentheses. ___,, laH_C BEST COPY AVAILABLE m lcrrf LY ci1SI OF Iixxmw Stateuent Yeas WIg Deere 31, 1977-1982 1977 - 1978- - 1979- 198D - 1981- Apprai- - ApratIal Appraisal Appraisal Appraisal Appaisa fevised Estimate Actual Estimte Actual FEtimate Acual Esmate Actual fstimee A a Fstixmte fistimate Elaectricity Ses - Q 285 265 317 288 348 330 401 354 479 343 518 379 Avage Fvn - T1mbalaj1dh I/ 3.10 3.16 4.03 3.84 4.43 3.98 4.43 4.33 4.87 5.22 i 4.87 5.59 (lrdsm~ ~ichas) Operatirng Rpeme Electriedty Sales 11 8,3 8,371 12,775 11,064 15,416 13,140 17,764 15,517 23,327 17,909 25,226 21,776 Operating BSpeses Operation and Maintenarc 1,1O8 1,046 1,285 1,375 1,490 1,523 1,728 1,685 2,004 1,906 2,164 2,500 Fuel 255 245 300 371 216 380 233 574 251 1,022 270 1,300 Ad-dnistration and Cereral 1,276 1,381 1,480 1,725 1,717 2,007 1,992 2,658 2.310 2.829 2,495 3,750 Lepreciation 2/ 2,220 1,408 2,727 1,978 3,150 2,129 4,861 2,258 6,748 3,298 7,256 5,448 Total Operating EFpeones 4,859 4,080 5,792 5,W 6,573 6,039 8,814 7,175 11,313 9,055 12,183 12,998 o Operatirg Inc}me 3,976 4,291 6,983 5,615 8,843 7,101 8,950 8,342 12,014 8,854 13,043 8,778 Other Ina 40 144 50 265 60 145 70 130 80 8 90 125 %t LIncae tefore Interest 4,016 4,435 7,033 5,880 8,903 7,246 9,020 8,472 12,094 8,862 13,133 8,903 Interest dCarged to COperaio 1,6"8 1,901 1,596 2,293 2,382 2,361 2,263 2,359 7,650 4,972 7,490 8,036 14At Inome 2,408 2,534 5,437 3,567 6,521 4,885 6,757 6,113 4,444 3,890 5,643 867 Rate of itturn 31 8.4 9.1 12.1 10.3 13,5 9.5 8.3 9.2 7.8 6.6 82 3.4 Pequrded Rate of Return uzider Section 5.03 of loan Agreenrxt n.a. 12.0 12.0 8.0 8.0 8.0 I/ Tariff increases of 2S%, ICM, 5Z, 11.5% and 8.5% were implear&ed In March 1978, October 1979, July 1980, March 1981 and April 1982, reqttiely. V Depreeiatin in appraisal est-stes on revalued assets. All other deprecatIon amts ate ac historical cast aids. 3/ Rate c returm is caIiatea lAth operatiig i lam mA ret filr assets adjusted to reflect revaluation of fLis assets and deredatimr therecn. __ BEST COPY AVAILABLE NJA FAIS U HYfREElIC P1 E CrY SUPLY MffSSIM OF 1A1M Ba1anm Siet As on 1ecewter 31, 1977-19R7 -977 -1978- -1979-- - 1981- -1982 ApdMlAfaia Apprai:a Apms Appaia Apraia Rde Estmae Ac__ ____e _ua Ete Actu Estimat ____ _st_at Atbn Estimate Vstimte FLied Assets Plant in COeration 74,032 71,854 81,825 89,306 98,193 98,865 179,560 64,252 206,054 146,646 208,454 1664,664 less: komLzatd Depreiation 17,960 15,444 22,214 17,748 27,252 21,032 34,429 15,717 44,103 18,925 51,357 24,373 Net Plant 56,072 56,410 59,611 71,558 70,941 77,833 145,13! 48,535 161,951 127,721 157,097 140,291 ¶Uotk in Prgress 18,62 14,583 41,510 19,175 63,665 47,403 5,304 81,214 523 12,025 2,523 1,353 Qrreit Assets Cash 290 738 330 824 913 1,200 4,225 39 8,319 1,001 13,257 - ReOP_I_V`ab1es - CorD I,060 2,346 1,533 1,651 1,850 2,068 2,132 2,331 2,799 2,844 3,027 3,000 1Rectaebles - Other 350 400 506 400 495 450 717 450 957 500 657 Stocks 1.100 1,726 1.200 2,615 1,400 2,471 1,60D 2,531 1,800 4,345 2,000 4,580 Total Current Asets 2,800 4,810 3,463 5,596 4,563 6234 8,407 5,618 13,368 9,147 18,784 8,237 Total Assets 77,524 75,803 104,584 96,329 139,169 131,470 158,842 135,367 175,842 148,893 178,404 149,881 - ruity Ketal1n EamntUgs 9,968 11,892 15,405 15,266 21,926 18,523 28,683 25,236 33,127 29,127 33,770 29,994 Capital QutrbLitioen 1,442 1,424 1,742 1,872 2,142 2,285 2,592 3,278 3,092 4,259 3,642 4,909 Fevaluatlon Reserve 17,235 18,264 22,001 23,283 27,068 29,704 33,098 - 45,435 - 45.435 - Total uity 28,645 31,580 39,148 40,421 51,136 50,512 64,373 28,514 81,654 33,386 87,847 34,903 1-xxz Term Debc 47,773 37,002 64,069 49,318 86,708 70,613 92,932 94,731 92,605 105,691 1 88,631 107.507 Carent Labities Aats PyaFble 986 3,763 1,143 4,644 1,325 9,490 ,537 11,157 1,783 9,305 1,926 2.137 Overdrafts 120 3,458 224 1,946 - 855 - 965 - 50 - 5.334 Total current lieMlt ie 1,106 7,221 1,367 6,.299 1,325 10,345 1,537 12,122 1,783 9,816 1,926 7.471 Total quity & lties ,24 75,803 104,584 96,329 139,169 131,470 158,42 135,367 175,842 148,893 178,404 149.881 Debt/Eiiry Patfo 63/37 54/46 62/38 55/45 63/37 58/42 59/41 77/23 53|47 76/Z4 50150 75125 tljrTenr Ratio 2.8 0.7 2.5 0.9 3.4 0.6 5.5 .46 7.5 .93 9.8 1.11 R,sctvables -Ave. IS. of Days Sal 44 n.a. 44 54 44 57 44 55 44 58 44 50 1MAtI BEST COPY AVALBLE ~E=RcY suLY aX2¶sssi(1 OF AkM arnds Stateuent Years DEding Detebr 31, 1977-1982 (71nnusandrl Eadws) Ibtal -1977- -197--- -1979 - -19- -1981- -1982- -1977 to 1982- Appraisal Appraisal A isa Appraisal Appraisal Azraisal Red APrasal Actual & tatlmace Actu1 estimate ktual Estimate ktual Fstlmte ktual kstimate ktual Estimsat fstimate fstimate lvvised sou~ rnterea.y Gererated Funds 12at Incere Bafore Intermt 4,016 4,435 7,033 5,8P0 8,903 7,246 9,020 8,472 12,094 8,862 13.133 8,903 54,199 43,798 lepreciation 2,22D 1,408 2,727 1,978 3,150 2,129 4,861 2,258 6,748 3,298 7,254 S,668 26,960 16,519 Cth!r - 73 - (189) - (138) - (159) - (119) - - - (532) Available frwi Cat19IS 6s236 ~ t9 9,760 :7669 12,053 _ ,237 13,881 10,571 1,842 12,04 20,381 1 4,351 81159 59,785 mk (691-M4I) 5,370 1,085 2,742 4,794 700 1,636 754 639 - 693 _ - 9,566 8,647 IBRD (1I38491&) - 25 3,210 54 3,240 4,502 970 2,749 760 - _ - 8,180 7.330 DM110 (1387-T41fiI) - - 3,024 - 3,300 3,944 1,4b46 2,402 670- 1,043 - 24 8,440 7.413 ADB (006) 1,073 - 2,216 1,440 341 930 741 1,992 230 600 - 855 4.601 5,817 KM 833 - 70 - 2,860 944 538 3,298 20 1,627 - 499 4,501 6,349 EDF 1,824 - 2,875 294 4,955 2,535 820 4,297 - 1,960 - 154 10,474 9,240 3,(XD 4,682 5,(Xo 5,257 4,500 3,175 - - - 12,500 13,234 C-ditinal - - - - - 2,666 - - - - 2,666 GOe ;nmem 2,792 2,792 Otlkr 6,962 3,119 1,808 1,629 4,392 757 2, 8282 - 6,689 - 4,677 15,783 25.153 Total BorrwLt 19,062 9,031 20,945 13,468 24,288 21,089 7,890 26,51 1,860 12,612 - 6.209 74,045 8k86O Oapital GCntributiua 250 374 300 5m8 400 538 450 1,161 50D 1,208 550 650 2.450 4,479 Total Funds Provid 25,546 15,3Z1 31,005 21,405 36,741 30,664 22,21 3A,183 21,202 25,861 20,937 21,210 157,654 153.124 ApplicatIos Ctnsruction PaqAri,t OJila Fals II 11,088 4,451 18,675 12,433 21,050 25,679 4,895 23,358 4,250 4,G83 - 1,492 59,958 71,496 Trlsdssim 4,112 4,062 1,424 491 5,218 - 2,626 6,795 - 2,939 - 119 13,380 14.406 ftal IkVlo1x-it - - - - - - 2 - 469 - 1.865 - 2. 336 Otlar 4,517 3,659 1,503 2,799 1,500 2,293 2,000 2,952 2 21 2,253 4 400 3,124 16.117 17.2N Ibtal Gornsu on 19,717 I2,372 21,599 15723 27,768 27,9Z 9,5ZL 33,107 4 9,744 400 6,600 89,455 105,518 Debt Ser,ice 4,123 3,787 9,008 4,545 7,831 6,009 9,068 7,468 10,037 10,282 11,264 13,175 51,327 45,266 Trotal \mda Pqeatl 23.824 16.15 30.603 2D,268 35,599 33981 18,5B9 40,575 16,487 2D,026 15664 19,775 140,782 150,784 InPer6se (rease) in 'Abtll% CqitaL , e Cesh 1,642 (2,056) (64) 1,598 007 1,467 3,312 (1,271) 4,094 1,419 4,938 (5,827) 14,729 (4,670) Co other 66 1,218 466 (181) 335 (4,584) 320 (1,121) 621 4,416 335 7,26Z 2,143 7,010 Total 1,708 (838) 402 1,417 1,142 (3,117) 3,632 (2,392) 4.715 5,835 5,273 1,435 16,872 2,340 IXbt 5erv,le Gera 1,5 1,6 Il, 17 1,5 1.5 1.5 1,4 1.9 1,2 1.8 1.1 1.6 1.3 - 23 - APPENDIX A OFFICE OF THE PRESIDEN T AND CAR1NET, LILOlNGWE 3 27/10/83 197698 WORLD BANK ATTN: SHTV S. KAPUR DIRECTOR, OPFRATIONS EVAI.LJATON I DFPARThEPr RE: PROJECT COMPLETION REPORr (N MALAWI I N KUl.A FAL.l.S It HYlIROPRO.JECT BASICALLY WE FIND THE PRESENr PRAFT REPtlRT SATISFACrlRY A4ND WE HAVE NOTED THE SUCCESS OF SOME OF THE ESPECTS OF THE PROJECT, HOwEvERP wE HAVtE rHE FOL.l.OWING ORSERVATX(In rn MAKE: (1) PAGE 4. EcOI.carCAl ASPECTS: THE BRFJDtING AREAS f OR FISH DOWNSTREA1 HAVtE DEFN SUJBJECTED Tr CONSTANT MATER LEVELS AND THIS HAS AFFEC7ED THE BREEDING r 4ABXTS OF FISH, NtRMALLY THE L.CVEL. (F 'THE RItVER GOES UP AND DOWN THUS FxPOSING SOHE OF THE AREAS TO SUNSHINE. IT rs NOT KNOWIN QtIANTITA7IVEl.Y HOW MJCH 'THIS HAS REDUCED FISH PRODUcrTION DOWNSTREAh . 0) PAGE 5 . PRO,IfrWT COSTS ANY RELATEJ FINMNCXN6I rHE ORIGINAL ESTIMATE IN MK WAS K60.39 (ANNEX 4 REFERS) OR EL.StF THE MAL.AWI KWACHA FrltJRES WOUL.D S1OW AN INCREASE lIF 109 (3) IT WOULD BE DESIRABLE TO SEF HO MUCH OF tHE VUJLL.ARS16.O MIL.L.IoN cosr OVERRUN IS ATrRX1tTEID TO EACH CAUSAL FACTOR I.E. CONTRACTORS Cl-AIMS llNDl:ER PRICE ERCALATION PROVISIrNS, TRANSPORTATI ON D IFFI CUL.T IES ETC. (4) PAGF 9. ELASTICITY OF DEMAND FOR THE INDIJSTRIAI. SECTOR To TARIFF INCREASES XS SAID TO HAIVE BEfN MINM)L-. WE MiOU.JLD WANT TO KNOW THEF SA4E FDR THE DOMESTIC SECTOR AS WELL. (5) PAGE 12, M4RKET GRSONThl? t.3ANrYRE HAS NE9VER BEEN THE CAPITAL OF MALAWI* THE URBAN POPUJL..ATION FIBURES WERE IN 197? AS FOL.LOWS: BLANTYRE 219,000 Z0MRA 98,O0 AND L.rLONSWE 24,000. PLEASF ADKNOWI.ED6F. RECEIPT tF THIS TEIEX. REGARDS. CHAL.RES NTHENDA FOR CHIEF ECONOMiST BEST COPY AVAILABLE - 24 - APPENDIX A ZC7nr ITJRT9645 .JWS.158 (coiktiniued) D!ST WHFN RFPLYTNc3 TO THIS MFRSArt F:FFER TO I TCP F(t4 ZC .JWS0295 Z.JP2f53 IN 02109t4S fUl 02!/09147 43R9 PRES MI OFFICF OF THF PRFSXrITNT ANfI CABINFTp L!L.ONGSJW 3 2/ 11/83 ATTt SHTJ VS . KAPIR RE NKL.tA FAAI.lS T X HYPROPRfJ.J-rT. CORRFCT JIthN THF IIRRAN POPIUI.ATIOrN FMJRESI4 FnR l. O1Nt;lt At14J.1 7(1tMlA. WPRE SbOPPFD. RE(AR1S CHARLES NTHENDA 4389 PRES MI =11021.018 NNNN BEST COPY AVAILABLE o/3/r3 N69 0 2~~~~~~~~~1983 - 25 - ZCZC DIST4983 RCA2SO0 APPEnXX B 0rST PLYIN6 TO THIS MESSARE REFER TO t ICP FCA RCA 2850 4 248423 WORLDBANK RWRY ESCOM MI 248423 WORLDdANK 10.11.83 WORLD BANK WASHINGTON DC USA ATTENTIDON5 MR SHrV s KAPUR WE HAVE READ THE PROJECT COMPLETION REPORT NKULA FALLS 11 AND HAIVE FOUND IT TO REFLECT FArRLY AND ACTUALLY ALL rHE ASPECTS tlF THE PROJECT EXCEPT PARA 6.00 WITH REGARD TO TRAINING STOP THE REPORT IMPLIES THAT rHE DANK GROuIP FINANCED TRAINING OF 20 OR AT LEAST 16 ESCOM STAFF ABROAD STOP FROM THE ORIGINAL SUM OF US DOLLARS 300.000 ONLY US DOLL-ARS 10.0O0 WAS APPROVED BY THE BANK INVOLVING PAYMENT FOR PREPARATION OF TRArINING REPORT BY ELECTRICITY SUPPLY BOARD (IRELAND) STOP Al..L OF OUERSEAS TRAINING WAS FINANCED FROM ESCOII'S DWIN RESOURCES STDP THE REMAINING SUM OF US DOLLARS 260.000 WAS EVENTUALLY DIVERTED TO THE FINANCING OF THE ENOINEERING0 WORKS STOP PARA 7.01 BLANTYRE WAS NOT THE CAPITAL OF NALAWI. AT ANY TIME. ZOMBA WAS THE CAPITAL BEFORE IT WAS TRANSFERRED TO LILONGWE STOP R EGARDS ASHERSON CO@EWNSIt MINISTRY OF TRADE AND INDUSTRY CC tlINIDYTY OF TR4FEE COPY TO MINISTRY OF TRADE AND INUOSTRY, LILONGWE (ATTENTION MR CHIKONDF) 4246 ESCON I mr COPY A ti%Lt 2443WORt )SANK copyui wu~w 249423 WORLDRANK 42416 ESCOM MI _248423 WORLDBANK